Home Sales Probably Increased in February: U.S. Economy Preview

A sold sign hangs outside a single family home being built by Blume Construction in East Peoria, Illinois on March 16, 2012. Photographer: Daniel Acker/Bloomberg

March 18 (Bloomberg) -- Home purchases in the U.S. probably
climbed in February to the highest level in almost two years,
another sign of stabilization in the real-estate market,
economists said reports this week will show.

Combined sales of new and previously owned properties rose
to 4.93 million at an annual rate, the strongest since May 2010,
from 4.89 million in January, according to the median forecasts
in a Bloomberg News survey. Home construction also improved as
warmer weather bolstered prospects for the industry, another
report may show.

Job and income gains, cheaper homes and the lowest mortgage
rates on record have combined to push affordability to an all-time high. With fewer new dwellings on the market, residential
construction may be poised to contribute more to economic growth
this year.

“The evidence is very clear that housing is beginning to
improve,” said Russell Price, a senior economist at Ameriprise
Financial Inc. in Detroit. “I do not expect housing to be a
drag on GDP this year. It started to be a modest positive
contributor last year. Now that it’s actually contributing
again, that’s a significant turn of events.”

The National Association of Realtors will release its
existing-home sales data on March 21. Purchases increased 0.7
percent to a 21-month high 4.6 million at an annual rate, after
a 4.57 million pace in January, according to the Bloomberg
survey median.

Sales of new homes in February climbed to a 325,000 annual
rate, the fastest since December 2010, from 321,000 the prior
month, the survey median showed. The report is due from the
Commerce Department on March 23. For all of 2011, builders sold
304,000 homes, down 5.9 percent from the previous year.

Signings, Closings

New-home sales, which are tabulated when contracts are
signed, have lost their ability to forecast the broader market
as demand shifts to previously owned houses. Purchases of
existing houses are calculated when a deal closes about a month
or two later. New properties made up almost 7 percent of the
market last year.

The improvement in the labor market has contributed to the
recent housing gains. Payrolls rose in February, capping the
best six-month increase since 2006, while the jobless rate held
at a three-year low, according to Labor Department figures.

Warmer weather may have may have sustained construction and
encouraged more Americans to shop for new properties. The
average temperature was 38.2 degrees Fahrenheit (3.4 Celsius)
last month, 3.6 degrees warmer than the 20th century average and
the 17th warmest February in 118 years.

Housing Starts

Builders in February broke ground on 700,000 homes at an
annual pace, the most in three months, economists said ahead of
March 20 figures from the Commerce Department. That same report
may show the strongest pace of building permits, a sign of
future construction, since March 2010.

The National Association of Home Builders/Wells Fargo index
of builder confidence probably climbed in March to the highest
level since May 2007, economists said before a report tomorrow.
An advance would be the sixth straight, the best performance
since 1995.

“All the economic signs seem to be positive in terms of
consumer confidence, interest rates, unemployment levels,”
Martin Connor, chief financial officer at Toll Brothers Inc.,
said March 5 at a investors’ conference in Orlando, Florida.

The average rate on a 30-year fixed mortgage reached an
all-time low of 3.87 percent in February, according to data from
Freddie Mac.

A measure of housing affordability a month earlier climbed
to 206.1, according to the National Association of Realtors. A
value of 100 means that a family with the national median income
has enough to qualify for a median-priced property.

Builder Shares

Investors also are upbeat about prospects. The Standard &
Poor’s Supercomposite Homebuilding Index has advanced 29 percent
since the end of last year, more than twice the 12 percent gain
in the broader S&P 500.

Building materials-maker Owens Corning Inc. is among
companies also benefiting as housing stabilizes.

“We have the wind at our back as the economy recovers and
housing improves,” Sheree Bargabos, president of roofing and
asphalt at the Toledo, Ohio-based company, said on a March 9
conference call. “Growth is anticipated as the housing market
recovers, driven by home affordability, improving home values
and home remodeling activity.”

Federal Reserve policy makers last week said they will
continue to swap $400 billion in short-term securities with
long-term debt to lengthen the average maturity of the central
bank’s holdings, a move dubbed Operation Twist and aimed at
bringing down borrowing costs like mortgage rates.